Arizona Property Tax 2026: Limited Property Value, the 10% Assessment Ratio & Homeowner Rebate

How Arizona Property Tax Works in 2026

Arizona levies no state-level property tax — counties, cities, school districts, and special taxing districts each set and collect their own rates locally. The statewide average effective rate is approximately 0.48% of home value according to the Tax Foundation — roughly half the U.S. average of about 0.9% — making Arizona one of the lower-property-tax states in the country, though nominal county-level rates and the mechanics behind them can look confusing at first glance.

Arizona's system has two features that set it apart. First, Proposition 117, approved by voters in 2012 and effective starting the 2015 tax year, caps how fast a property's taxable Limited Property Value (LPV) can rise each year — no more than 5% over the prior year's LPV, regardless of how much the property's actual Full Cash Value has appreciated. Second, residential property is assessed at only 10% of its LPV to determine the taxable assessed value used to calculate your bill. On top of this, an automatic homeowner rebate, funded by the state as aid to school districts, reduces the primary school tax on an owner-occupied home by 50%, capped at $600 per year — with no application required. This guide explains how LPV and the 10% assessment ratio work together, the homeowner rebate, the Senior Valuation Protection Option, how county rates compare, and a worked example for a home in Maricopa County.

Limited Property Value: How Proposition 117 Caps Your Assessment

Arizona property has two distinct values on record with the county assessor: Full Cash Value (FCV), which approximates true market value, and Limited Property Value (LPV), a capped figure that's actually used to calculate your tax bill. Before 2015, this dual system created real confusion, since some levies used FCV and others used LPV. Voters simplified this with Proposition 117 in the November 2012 election.

The 5% Annual Cap

Since the 2015 tax year, Prop 117 requires that a property's LPV cannot increase by more than 5% over the prior year's LPV — or the current year's Full Cash Value, whichever is lower. If your home's market value jumps 15% in a single year, your taxable LPV can still only rise by up to 5%; the excess appreciation isn't captured in your taxable value until future years "catch up" toward FCV at the same capped 5% annual pace (or the cap simply continues to apply indefinitely as long as FCV keeps rising).

Why This Matters

Prop 117 functions similarly to assessment caps in other fast-appreciating states (like California's Prop 13, though far less restrictive): it smooths out the tax impact of a hot housing market for existing owners, spreading any large single-year value jump over several years of 5%-capped growth rather than hitting the taxpayer all at once. Unlike California's system, Arizona's LPV is set from the property's prior-year LPV plus 5% (never above Full Cash Value) rather than from the owner's purchase price.

What Uses LPV vs. Full Cash Value

Since Prop 117, virtually all locally-levied property taxes — the primary tax rate (funding general government and schools) and secondary tax rate (funding voter-approved bonds and overrides) — are calculated using LPV, eliminating the older dual-value confusion. Full Cash Value remains on record and is relevant primarily for context and certain limited purposes, but LPV is what determines your actual bill.

The 10% Assessment Ratio: From LPV to Taxable Value

Once your county assessor determines your Limited Property Value, Arizona law applies an assessment ratio based on the property's legal classification to arrive at the taxable assessed value that tax rates are actually applied to.

Residential Property: 10%

Owner-occupied primary residences and most residential rental property fall into Legal Class 3 (owner-occupied) or Legal Class 4 (residential rental/other residential), both of which carry a 10% assessment ratio. This means only 10% of your home's LPV — not the full LPV, and certainly not full market value — is subject to tax rates.

Example: Converting LPV to Assessed Value

A home with a Limited Property Value of $350,000:

$350,000 × 10% = $35,000 assessed (taxable) value

Tax rates (expressed per $100 of assessed value in Arizona, unlike the per-$1,000 convention used in many other states) are then applied to this $35,000 figure, not the $350,000 LPV or the home's actual market value.

Why This Makes Arizona's Rates Look Different

Because only 10% of LPV is taxable, Arizona's nominal tax rates (often expressed in dollars per $100 of assessed value) can look comparatively high in isolation without triggering an equally high effective rate — the small taxable base does most of the work in keeping actual bills low. This is conceptually similar to Georgia's 40% assessment ratio, just with a smaller percentage, and is part of why comparing raw millage or per-$100 rates across states without adjusting for the assessment ratio is misleading.

Commercial and Other Classes

Other property classes carry different assessment ratios — commercial property (Class 1) is generally assessed at a higher ratio than residential, which is part of why Arizona commercial property owners typically face a meaningfully higher effective tax burden than residential owners on a comparable-value property.

The Automatic Homeowner Rebate: State Aid to Education

Arizona's broadest property tax relief program requires no application at all. Under A.R.S. §15-972, the state provides direct aid to school districts that offsets a portion of the primary property tax levied for school funding on owner-occupied homes.

How It Works

For homes classified as owner-occupied primary residences (Legal Class 3), the state automatically reduces the school district's primary property tax rate applied to that home by 50% (the statutory percentage since December 31, 2021), with the total reduction on any single parcel capped at $600 per year. This appears directly on your property tax bill as a line item labeled "STATE AID TO EDUCATION" showing the dollar amount of the rebate you received.

No Application Required

Because eligibility is tied directly to your property's Legal Class 3 (owner-occupied) designation on file with the county assessor, the rebate is applied automatically — there's no separate form to file. If you don't see the STATE AID TO EDUCATION line on your bill, it may mean your property isn't currently classified as owner-occupied with your county assessor, which is worth checking and correcting if you do, in fact, live in the home as your primary residence.

State Funding Constraints

The statute caps total statewide spending on this program to the amount appropriated by the legislature each year (per A.R.S. §35-173), meaning the rebate mechanism, while automatic per-parcel, ultimately depends on continued state budget appropriations rather than being a permanent constitutional guarantee.

Senior Valuation Protection Option ("Senior Freeze")

Arizona offers a distinct relief program for older homeowners: rather than reducing the tax bill directly, the Senior Valuation Protection Option freezes the property's Limited Property Value itself, preventing further increases for a set period.

Eligibility

• At least one owner must be 65 years of age or older
• The applicant must have owned and occupied the property as a primary residence for at least the two full years immediately preceding the application
• Total income (from all sources, including Social Security, VA disability, pensions, capital gains, interest, and dividends — both taxable and non-taxable — averaged over the three calendar years preceding the application year) must fall under the county's published limit

2026 Income Limits

How the Freeze Works

Once approved, your Limited Property Value is frozen at its current level for three years, regardless of whether market values rise or fall during that period. The freeze is renewable at the end of each three-year term if the homeowner still qualifies under the then-current income limits. This is separate from — and can be combined with — the automatic homeowner rebate described above, since the rebate reduces your tax bill directly while the freeze limits growth in the underlying value your bill is calculated from.

Applying

File an application (Arizona Department of Revenue Form 82104) with your county assessor's office by September 1, 2026 to lock in your value for the 2027 tax year. Since eligibility and exact filing windows can vary slightly by county administration, confirm your specific county's deadline and required documentation directly with your county assessor.

How County Property Tax Rates Vary

Because Arizona's counties, along with overlapping cities, school districts, and special districts, each set primary and secondary rates independently, effective rates vary across the state even after accounting for the uniform 10% assessment ratio and 5% LPV cap. The statewide average effective rate is about 0.48% (Tax Foundation, 2024 Census data); county-level effective rates are not published here because no official statewide per-county ranking was available. Always check your specific parcel's full rate breakdown with your county treasurer or assessor.

Worked Example: $400,000 Home in Maricopa County (Phoenix)

This example walks through Arizona's full calculation chain — LPV, the 10% assessment ratio, an illustrative combined rate, and the automatic homeowner rebate — for a hypothetical $400,000 home near Phoenix.

Step 1: Determine Limited Property Value

Assume this home's Full Cash Value (market value) is $400,000, and its LPV — after applying Prop 117's 5% annual cap over recent years — has settled at approximately $370,000 (a typical modest gap for a home that hasn't seen an ownership change recently).

Step 2: Apply the 10% Residential Assessment Ratio

$370,000 × 10% = $37,000 assessed (taxable) value

Step 3: Apply an Approximate Combined Rate

Assume, for illustration only, that primary plus secondary rates total $6.00 per $100 of assessed value (an assumption, not a published rate):

$37,000 × $6.00 ÷ 100 = $2,220 per year (before the homeowner rebate)

Step 4: Apply the Automatic Homeowner Rebate

If this is an owner-occupied primary residence, the state automatically reduces the school district primary tax portion by 50%, up to a $600 cap. Assuming the school primary tax portion of this bill is large enough for the full rebate to apply:

$2,220 − $600 = $1,620 per year net, after the rebate — no application required, since it applies automatically to Legal Class 3 property

Reading This Together

The combination of the 5% LPV growth cap, the 10% assessment ratio, and the automatic $600 homeowner rebate is why Arizona's effective rates run so far below the national average despite counties setting their own nominal rates independently. Your actual bill depends on your specific parcel's LPV (available from your county assessor's online parcel search), the exact combined primary and secondary rate for your specific school district and special districts, and whether you're claiming any additional relief like the Senior Valuation Protection freeze.